By some estimates, tens of millions of workers in the United States do not have a traditional banking relationship. This fact is driving increasing numbers of employers to assist their “unbanked” employees by establishing financial accounts that use stored-value cards and other similar means. Rather than issuing a traditional paycheck, the employer establishes a stored-value account for the employee, and periodically deposits earned wages into that account. The employee may then use a card (e.g., at an ATM) to access the funds in the account. This provides advantages of wages being paid electronically when the employee does not have or does not want to use a traditional bank account. The employee may quickly access the funds, and the employer will benefit from lower costs from not having to prepare and distribute paper checks.
While stored-value accounts and the associated presentation instruments (e.g., cards) provide employees with convenient access to funds in most cases, there are limitations. For example, while an employee may be able to make ATM cash withdrawals and PIN-based card purchases, the employee may not be able to make “signature-based” purchases, such as by check or other negotiable instrument.
Systems and methods have been developed for permitting stored-value account holders to “write” checks. One exemplary system is described in U.S. patent application Ser. No. 11/223,441, filed Sep. 9, 2005 by Richard Jackman et al, which is hereby incorporated by reference.
In exemplary systems, a consumer receives a batch of “blank” checks for use with a stored value account, and writes a check by contacting the issuer and requesting that funds in the account be allocated to one of the checks. The user is given a transaction number, which the user writes on the check (along with the amount). The issuer allocates the amount (and deducts it) from the available balance in the account. When the check is presented to a merchant or other payee, the merchant contacts the issuer and provides information such as the transaction number and amount. If authentic, the issuer authorizes (verifies the authenticity of) the check, assuring the merchant that the check amount has been set aside and will be paid when the check is processed through the merchant's bank. After authorized, that check (and transaction number) may not be used for any subsequent transaction.
While such a system is effective in giving checking writing capabilities to the “unbanked” consumer, some drawbacks and need for further improvement have been suggested. For example, there may be costs associated with printing a large inventory of blank checks for distribution to users, some of which may never used. Further, should a blank check be misappropriated by an unscrupulous individual, an unsuspecting clerk at a merchant location or store may accept the misappropriated check as payment without conducting the necessary authorization step. Further, some users (particularly less sophisticated consumers that have no experience in maintaining a checking account), may find it burdensome to determine (and remember) the remaining account balance as each check is written, particularly if fees may be charged by the issuer for the check. Users may also make errors in entering the transaction number or other identifying information on the check, making it difficult for the merchant to have the check properly authenticated.